India's industrial production fell by 0.4 per cent in September from a year earlier, a much weaker-than-expected performance.

Analysts polled by Reuters had expected a rise of 2.8 per cent in September output. Revised government figures released on Monday showed August output growth was revised down to 2.3 per cent from 2.7 per cent.

Manufacturing, which constitutes about 76 per cent of industrial production, fell by 1.5 per cent from a year earlier, the federal statistics office said.

Here is what experts had to say:

SAUGATA BHATTACHARYA, SR VP-BUSINESS & ECONOMIC RESEARCH, AXIS BANK

"It is not a shock, it is a surprise. We ourselves were expecting 2.8 per cent. Obviously, the shock has come from capital goods and even lower basic goods and consumer durables. So all-in-all, quite a bleak picture of production in September, which is also very surprising because the base effect we were looking at were not powerful to have gotten these numbers down. Being a month prior to the ramp up of production, for sales in festive season, I think, it is quite a surprise."

JYOTINDER KAUR, ECONOMIST, HDFC BANK

"Yes, I am quite surprised. But, it is important to take these month-on-month numbers with a pinch of salt. If you remember, last month there was an upside to the IIP reading. I think the broader take-away from this print is the fact that while sentiment had turned around about a month ago, the reality of doing business today and the reality of production has not changed dramatically. These are factors that both the central bank and the government should take cognizance of."

R V KANORIA, PRESIDENT, FICCI

“The negative IIP figure for September 2012 is indeed disturbing as it indicates that manufacturing growth had not bottomed out in previous months and both domestic and export demand continue to remain an area of concern for us.

"At this juncture, it is important that Government does not lose momentum on reform front and need to take courage now to implement some big ticket reforms like implementation of GST, effective and time-bound coordination mechanism for project clearance envisaged in NIB, introducing competition in coal sector and introducing targeted delivery mechanism for existing development schemes to check the subsidy burden.

"Capital goods remain a cause for concern as the growth of this sector has fallen steeply in September and also figures for August have undergone for downward revision thereby reflecting a continued environment of subdued investment activity."

ADITI NAYAR, SR. ECONOMIST, ICRA

“The unexpected contraction in industrial production in September 2012 reflecting the sharp de-growth in capital goods (in spite of a benign base effect), highlights the weakness in investment activity. Additionally, the decline in the pace of growth of intermediate and consumer goods in sequential months is indicative of a moderate demand for finished products ahead of the festive season, even as some key sectors such as passenger vehicles have displayed an upturn.

“Following the negligible 0.1 per cent growth in H1FY13, industrial growth is expected to display a short-lived pick-up in October 2012, on the back of a benign base effect and easing contraction of merchandise exports.”

ANUBHUTI SAHAY, ECONOMIST, STANDARD CHARTERED BANK

"An ugly print. Hence it is likely to raise expectation of an earlier action by the RBI, especially if it accompanied by a weaker inflation print on November 14th. However it is important to remember that IIP has been a pretty erratic series in the past. We will focus on the WPI number and expect the first repo rate cut in Q1 2013."

SUJAN HAJRA, CHIEF ECONOMIST, ANAND RATHI SECURITIES

"This month's factory output data is a negative surprise. We were expecting a rise of 2.5 per cent. But monthly industrial production data is volatile, and it is difficult to give a long-term guidance based on one month's number.

"We still maintain our view that there will be some amount of industrial recovery in the second half of the current fiscal year ending in March. For the full year, we expect a rise of 4 per cent."

INDRANIL PAN, CHIEF ECONOMIST, KOTAK MAHINDRA BANK

"Everything put together, the growth factor could incrementally put more pressure on the Reserve Bank of India to cut interest rates, and when they see inflation easing in the next few months, as is the expectation, that is when they will cut rates.

"However, next month, we are expecting a bounce in the factory output number because of the pre-Dewali demand."

SHAKTI SATAPATHY, ANALYST, AK CAPITAL

"The biased data is largely due to volatile capital goods sector. However, the other sub-indices, including basic goods and intermediate goods signal stability in the growth numbers. Further the PMI reading somehow defies any sharp drop in the growth expectation.

"Having said that, we believe this is high time for the central government to restore the investment sentiment by implementing and introducing some more policy stimulus, thus addressing the growth risk from the beginning of next fiscal (year). The number would hardly move the RBI in revisiting their stance given the volatile nature of the production data."

MOSES HARDING, HEAD OF ASSET-LIABILITY MANAGEMENT, INDUSIND BANK

"The trend in growth and inflation is clear; downward pressure on growth and uptrend on inflation into the near term. So, no surprises from the IIP number and it is high time RBI gets into balancing act between growth and inflation."

ANJALI VERMA, ECONOMIST, MF GLOBAL

"Typically, some kind of inventory buildup also happens in September, so the numbers are all the more disappointing.

"On the other hand, CPI (consumer price inflation) continues to remain high. Going by RBI's guidance, the IIP numbers will now make a strong case for a rate cut to happen in January."

DEVEN CHOKSEY, MANAGING DIRECTOR, KR CHOKSEY SECURITIES

"Market is aware about it (muted IIP number) and therefore it will not get disturbed. To me, the biggest trigger would be policy decisions in winter session of parliament and rate easing by banks."

MEHRABOON IRANI, HEAD, PRIVATE CLIENT GROUP, NIRMAL BANG SECURITIES

"Now with the stance more or less spelled out by RBI, market can only be sure that interest rate is coming, which will be taken positively."

MARKET REACTION

- The 1-year overnight index swap (OIS) rate fell around 3 basis points to 7.73 per cent from levels before the data, while the 5-year OIS rate fell 3 bps to 7.12 per cent, according to dealers.